What Is a Capital Growth Strategy?

A capital growth strategy seeks to maximize capital appreciation of an investment portfolio over the long term through an asset allocation geared to securities with📖 high expected returns.

Investors who use a capital growth strategy seek out companies and investments with the potential to grow at a higher rate compared to the market or the industry. Capital growth investors are willing to trade a certain amount of risk in order to potentially reap 澳洲幸运5官方开奖结果体彩网:higher returns.

How a Capital Growth Strategy Works

Portfolios with a 澳洲幸运5官方开奖结果体彩网:capital growth strategy consist mainly of equities, also known as stocks. The exact proportion of equities to the total portfolio will vary according to the individual investor's investment horizon, financial constraints, investment goals, and 澳洲幸运5官方开奖结果体彩网:risk tolerance.

In general, a capital growth portfolio will contain approximately 65% to 70% equities, 20% to 25% 澳洲幸运5官方开奖结果体彩网:fixed-income securities, and the remainder in cash or money market securities. 🧜While seeking high returns, this mixture still somewhat protects the investor against a severe loss in portfolio value if the higher-risk equity portion of the portfolio takes a plunge.

Many capital growth investors will select a moderate growth objective, while others will opt for a high growth objective. Moderate growth investors might purchase stocks of established 澳洲幸运5官方开奖结果体彩网:blue-chip companies. Investors with a high growth objective are willing to invest in more spec꧋ulative assets, such as growღth stocks from companies that have little or no current profits but have the potential for high future gains.

Special Considerations

A capital growth strategy is suitable for most investors with a long time horizon, typically 10 years or more. A common goal of a capital growth strategy is to save for retirement while simultaneously funding other long-term objectives, such as providing for a child's college education or building a legacy for future generations. 澳洲幸运5官方开奖结果体彩网:Long-term investors can tak🌳e on the higher risk of equities when they have 𒆙more time to recover from sharp losses.

澳洲幸运5官方开奖结果体彩网:Asset allocation by age is an important investment strategy that focuses on changing an investor's asset allocation based on the different stages of life. Investorsꦺ in their 20s and 30s employ a different strategy than those in their 40s and 50s. Likewise, investors approaching retirement or already in retirement have different strategies and objectives.

In general, younger investors can tolerate more risk and would be more likely candidates for a strategy with a high growth objective compared to investors who are older and are looking for 澳洲幸运5官方开奖结果体彩网:capital preservation.

Constructing a Capital Growth Strategy

Investors have a multitude of choices when building an allocation that pursues capital growth. More 澳洲幸运5官方开奖结果体彩网:sophisticated investors may choose to construct a portfolio of individual stocks that can be balanced with fixed income and cash or through hedging strategies that leverage options and futures.

Investors lacking the time or knowledge to manage a portfolio of individual securities can choose from packaged products including 澳洲幸运5官方开奖结果体彩网:mutual funds and 澳洲幸运5官方开奖结果体彩网:exchange traded funds (ETFs). These are available i🦩n dozens if not hundreds of different categories. For capital growth, an investor would be well served to own funds or ETFs that provide diversified exposure to💎 stocks with value and growth characteristics as well as different market capitalizations and geographies.

For a one-size-fits-all approach, investors can select a 澳洲幸运5官方开奖结果体彩网:target-date fund that holds an allocation of stocks, bonds, and cash that becomes more conservative as the target date approaches. Another pre-set allocation choice is a 澳洲幸运5官方开奖结果体彩网:lifestyle fund that maintains a static allocation based on a choice of risk levels. For capital 𒅌growth, an investor would choose a m𝔍oderate or aggressive allocation.